"Our strategy for store closings is to optimize our cost per square foot," she said during a conference hosted by Bank of America/Merrill Lynch. "The goal is not closing stores per se."

Over the next three years, 25% of the leases on the stores in the company's stable of brands, including Pottery Barn home furnishings stores and Williams-Sonoma kitchen stores, will be coming to an end. Williams-Sonoma sees that as a major opportunity to negotiate more favorable lease costs or terms or to relocate or close stores entirely, executives said. That should help it return to historical levels of profitability for its retail stores, McCollam said.

Williams-Sonoma has been introducing lower prices across its store brands, including its namesake outlets as well as Pottery Barn and West Elm. Among the best-selling merchandise, the company said, are inexpensive goods such as pillows.

The San Francisco-based retailer also is lowering prices on bigger-ticket items such as furniture to entice shoppers. The starting price of a sofa at its Pottery Barn stores has dropped to $999 from $1,299. At its value-oriented West Elm stores, it reintroduced the basic futon, furniture that can convert from a sofa to a bed.

Howard Lester, chairman and chief executive of Williams-Sonoma, said on a conference call with investors, "People's homes are still one of their most material assets, and they will invest in them over time. And when they do, our brands will be well-positioned to capitalize on the opportunity."

The company also pared projected capital spending for this year, and said it expects further overhead cost cuts in catalog production, information technology and logistics.

It expects to save about $75 million in costs on a pretax basis for 2009.

The company, which also operates Pottery Barn stores, still expects diluted per-share earnings at the low end of a previous range of 10 cents to 30 cents a share for its 2008 fourth quarter, even after taking a charge tied to the cost cuts.